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Social Learning Through Endogenous Information Acquisition: An Experiment

Author

Listed:
  • Bogaçhan Çelen

    (Graduate School of Business, Columbia University, New York, New York 10027)

  • Kyle Hyndman

    (Department of Economics, Maastricht University, Maastricht 6211 LM, The Netherlands)

Abstract

This paper provides a test of a theory of social learning through endogenous information acquisition. A group of subjects face a decision problem under uncertainty. Subjects are endowed with private information about the fundamentals of the problem and make decisions sequentially. The key feature of the experiment is that subjects can observe the decisions of predecessors by forming links at a cost. The model predicts that the average welfare is enhanced in the presence of a small cost. Our experimental results support this prediction. When the informativeness of signals changes across treatments, behavior changes in accordance with the theory. However, within treatments, there are important deviations from rationality such as a tendency to conform and excessive link formation. Given these biases, our results indicate that subjects would, except when faced with a small cost, have been better off not forming any links. This paper was accepted by Teck Ho, behavioral economics.

Suggested Citation

  • Bogaçhan Çelen & Kyle Hyndman, 2012. "Social Learning Through Endogenous Information Acquisition: An Experiment," Management Science, INFORMS, vol. 58(8), pages 1525-1548, August.
    • Handle: RePEc:inm:ormnsc:v:58:y:2012:i:8:p:1525-1548
    DOI: 10.1287/mnsc.1110.1506
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    References listed on IDEAS

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    Cited by:

    1. Penczynski, Stefan P., 2017. "The nature of social learning: Experimental evidence," European Economic Review, Elsevier, vol. 94(C), pages 148-165.
    2. Agnieszka Rusinowska & Vassili Vergopoulos, 2020. "Ingratiation and Favoritism in Organizations," Journal of Institutional and Theoretical Economics (JITE), Mohr Siebeck, Tübingen, vol. 176(3), pages 413-445.
    3. Morin, Olivier & Jacquet, Pierre O. & Vaesen, Krist & Acerbi, Alberto, 2020. "Social information use and social information waste," SocArXiv rqcdf, Center for Open Science.
    4. Jacob K. Goeree & Leeat Yariv, 2015. "Conformity in the lab," Journal of the Economic Science Association, Springer;Economic Science Association, vol. 1(1), pages 15-28, July.
    5. Chen, Yan & He, YingHua, 2021. "Information acquisition and provision in school choice: An experimental study," Journal of Economic Theory, Elsevier, vol. 197(C).
    6. Andrew M. Davis & Vishal Gaur & Dayoung Kim, 2021. "Consumer Learning from Own Experience and Social Information: An Experimental Study," Management Science, INFORMS, vol. 67(5), pages 2924-2943, May.
    7. Diefeng Peng & Yulei Rao & Xianming Sun & Erte Xiao, 2019. "Optional Disclosure and Observational Learning," Monash Economics Working Papers 05-18, Monash University, Department of Economics.
    8. Duffy, John & Hopkins, Ed & Kornienko, Tatiana & Ma, Mingye, 2019. "Information choice in a social learning experiment," Games and Economic Behavior, Elsevier, vol. 118(C), pages 295-315.
    9. Yan Leng & Yuan Yuan, 2023. "Do LLM Agents Exhibit Social Behavior?," Papers 2312.15198, arXiv.org, revised Feb 2024.

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